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China gets serious about safety

On 1 December 2014 amendments to the Work Safety Law of the People’s Republic of China (Work Safety Law) came into effect. The amendments, which have been mooted since the beginning of the calendar year, are considered a response by the Chinese government to a series of high profile disasters including the Qingdao Oil Pipeline explosion of late 2013, which claimed the lives of 62 people and injured many more.

The tougher, amended Work Safety Law is just one part of a concerted push by the Central Government to improve work health and safety.

The amendments focus almost entirely on toughening laws against companies and “persons in charge”, in respect of work health and safety responsibilities. As a general rule, fines against companies and their persons in charge have significantly increased. However, it is worth noting that there are no changes of substance to the obligations of employees themselves as they relate to work health and safety.

17 new Articles and a host of other changes result from the amendment to the Work Safety Law. The main amendments may be categorised as falling into the following 4 areas:

increased responsibility relating to work health and safety for companies and executives;

increased penalties for companies breaching work health and safety laws and regulations;

increased penalties for “persons in charge”; and

widening the powers of the State Administration of Work Safety to deal with companies which breach work health and safety laws and regulations.

1) Increased Responsibility

The amended Work Safety Law provides an expanded set of responsibilities for entities in relation to work health and safety. Some updates include:

Accountability - an entirely new Article 19 of the Work Safety Law provides that an entity requires a“responsibility system” which specifies responsible persons, scope of responsibilities, assessment standards and other relevant content. Entities are required to implement the responsibility system and set up appropriate mechanisms to ensure its proper implementation and supervision.

Safety Management System - Article 22 of the Work Safety Law is also a new addition, requiring entities to organise the drafting or, or to draft rules, regulations and operating procedures for work safety and in particular, emergency response plans. Entities are required to educate and train employees (including organising drills) and ensure overall implementation. Minor amendments to other articles provide further focus on emergency response plans. Article 78 of the Work Safety Law also provides that emergency rescue plans should be formulated in conjunction with emergency rescue systems organised by the State.

Risk Management - Article 38 provides that entities are to have systems in place to screen, discover and handle “hidden dangers” and to take steps to eliminate those hidden dangers and ensure the prevention of accidents.

2) Penalties for Companies

One of the major amendments to the law is the significant increase in fines which may be imposed on an entity where an accident occurs. The fines were previously set out in subordinate legislation to the Work Safety Law (being the Regulations on Reporting, Investigation and Disposition of Work Safety Accidents (Regulations)) and they ranged between RMB 100,000 to RMB 5,000,000 (approx. $16,000.00 - $810,000USD) across 4 categories of accident. Those fines have markedly increased, with a potential fine of RMB 20,000,000 (approx. $3,250,000USD) available in the most serious of circumstances.

The increased fines as contained in the new Article 109 of the Work Safety Law are summarised in the table below:

The categories of accident are still to be determined by reference to factors of:

number of deaths;

number of severe injuries to persons; and

value of direct economic loss attributable to the accident.

There is little further guidance as to what would constitute “particularly serious” circumstances for the purpose of attracting the highest band of fines available.

3) Penalties for ‘Persons in Charge’

“Persons in charge” are now subject to a set of “new” fines and punishments in circumstances where a failure by a person in charge leads to an accident. In previous circumstances, fines for persons in charge ranged from RMB 20,000 – RMB 200,000 (up to approximately $32,500USD). The new equivalent provision provides for a scaling fine system from 30% to 80% of the offending person’s “previous year’s annual income” depending on the severity of the accident.

It is important to note that a provision with almost exactly the same wording has been in place in the Regulations for some time now.

It should also be noted than a person in charge may also have work safety qualifications suspended or cancelled.

Another significant penalty is that in addition to demotion and discharge from their post, potential fines of 60% - 100% of previous year’s annual income apply where a person in charge fails to make immediate arrangements for rescue operations.

Otherwise, generally increased fines apply across the board for a number of standing offences which remain intact or with minor modifications.

4) Powers of Enforcement

Enforcement powers of the State have also been expanded and are more fully specified in the amendment. The powers of the State now include the following:

cutting electricity or the supply of “civil explosive” to allow enforcement where entities refuse to follow orders of the regulator – the 24 hour notice period for this can be made immediate and without notice where the operations of the entity endanger work safety (Article 67);

order suspension of operations where failure of an entity to ensure input of funds into work safety practices of the entity leads to unsafe work conditions (Article 90); and

close down a workplace where dangerous articles are manufactured, used or stored in violation of laws (Article 62).

Regulators still retain their previous powers to enter sites for inspection, acquire materials, conduct interviews, demanding rectification of hazards and to “seal up” facilities which are not up to standard.

Conclusion

In light of the harsher penalties and expanded focus on accountability, companies working in China should take steps to:

review their work health and safety management systems and policies – in particular, accountability systems and emergency response plans;

update systems and policies as necessary; and

ensure management and executives take proactive steps to oversee the implementation of those systems and policies, especially to ensure prompt rescue and emergency response should the need arise.

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